SUMMARY OF BOARD DECISIONS

Summary of Board decisions are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions are included in an Exposure Draft for formal comment only after a formal written ballot. Decisions in an Exposure Draft may be (and often are) changed in redeliberations based on information provided to the Board in comment letters, at public roundtable discussions, and through other communication channels. Decisions become final only after a formal written ballot to issue an Accounting Standards Update.

Insurance contracts. The FASB and the IASB continued their joint discussions on insurance contracts by discussing the discount rates for components of contracts cash flows that are not subject to the “mirroring approach” but are affected by expected asset returns. In a separate meeting, the FASB also discussed when guarantee contracts that meet the definition of insurance should be accounted for in accordance with the proposed insurance contracts standard.

Discount Rates—Components of Contracts Cash Flows to Which Mirroring Does Not Apply but That Are Affected by Expected Asset Returns

The Boards tentatively decided to clarify that, for cash flows in the insurance contract that are not subject to mirroring and are affected by asset returns, the discount rates that reflect the characteristics of the contract’s cash flows should reflect the extent to which the estimated cash flows are affected by the return from those assets. This would be the case regardless of whether:

The transfer of the expected returns of those assets are the result of the exercise of the insurer’s discretion, or

The specified assets are not held by the insurer.

The Boards also tentatively decided that, for cash flows in the insurance contract that are not subject to mirroring and that are affected by asset returns, upon any change in expectations of those cash flows (for example, the crediting rate) used to measure the insurance contracts liability, an insurer should reset the locked-in discount rates that are used to present interest expense for those cash flows.

Scope—Guarantee Contracts (FASB-only Discussion)

The FASB tentatively decided that the proposed insurance contracts standard would apply to guarantee contracts within the scope of FASB Accounting Standards Codification® Topic 944, Financial Services–Insurance, and would not apply to guarantee contracts within the scope of Topic 815, Derivatives and Hedging.

The FASB will consider this topic further in a future meeting.

Next Steps

The FASB and the IASB will continue their joint discussions on insurance contracts at their joint meeting in January 2013.